Crypto Currencies and Transaction Fees

I don’t use Uber very often, but I can still remember the first time I saw “Surge pricing” in action. It was a rainy and cold Thursday night and I was in a part of NY with little access to public transport. After consulting the app, I saw that it would cost $60 to get me home rather than the usual $20-$30. I walked to the subway.

Crypto currencies have their own version of surge pricing, set by the system and its users. It is one of the many ways in which they differ from traditional payment systems like PayPal or Visa. Those take a fixed percent of the transaction. In crypto land, that price fluctuates. Want to send a bitcoin to pay for a few online transactions? You will not likely pay exactly the same amount twice.

This is important, because over the last month median transaction fees for major crypto currencies have seen tremendous volatility, just like the asset prices themselves. We went back over the last 30 days, looking for peak median fees (in dollar terms) and compared those to median transaction amounts. Then we pulled what those fees look like now:

Different crypto currencies have very different transaction fees. Ethereum is currently the most expensive based on this analysis, at 1.6%. Bitcoin is in second place at 40 basis points and the other two are essentially free.

There is a high level of volatility in fees over even a short period of time. Note that we just pulled December and January data. Even in that window, median fees can vary widely.

If you are wondering when crypto currencies will see mass adoption for payment processing, solving this challenge is a prerequisite for that step. The technology is there to accomplish this. But it will certainly take some time.